Based on current tracking, trade looks set to drag slightly on Q4 GDP growth.

Australia’s trade surplus narrowed in November as imports grew faster than exports.

According to the Australian Bureau of Statistics (ABS), the trade surplus fell to $1.925 billion in seasonally adjusted terms, missing market expectations for a decrease to $2.175 billion.

October’s surplus, originally reported at $2.316 billion, was revised down to $2.013 billion.

The ABS said exports grew by 1% to $38.445 billion after seasonal adjustments, the highest monthly total on record.

The headline result was flattered by an enormous increase in the value of non-monetary gold exports — often a volatile component in the trade report — which surged by $681 million from a month earlier, more than the $532 million total increase in the value of exports.

Elsewhere, exports of non-rural goods — the largest component by dollar value — fell by $173 million from a month earlier.

Coal exports fell by $543 million, more that accounting for increases of $317 million and $90 million respectively for metal ores and minerals (iron ore) and other liquid fuels (LNG).

Rural goods also declined by $34 million, a result likely reflecting the impact of Australia’s drought. Those declines were partially offset by an increase in the value of services exports which rose by $57 million.

Tourism exports accounted for $43 million of the latter’s increase.

ABS

On the other side of the ledger, imports grew by a larger 2% from a month earlier, explaining the narrowing in the surplus.

Imports for capital and consumption goods rose by $433 million and $202 million respectively from the levels reported in October.

For capital goods, the largest increase came from civil aircraft imports which rose by $368 million from a month earlier. Non-industrial transport equipment imports also accounted for $140 million of the increase in consumption goods.

Non-monetary goods imports also lifted by $30 million.

They were partially offset by weaker imports of intermediate and other merchandise goods and services which fell by $22 million apiece.

The ABS said imports of fuels and lubricants dipped by $145 million, reflecting the impact of declining crude oil prices.

“The main surprise… was the resilience of fuel despite the sharp fall in global energy prices,” said Andrew Hanlan, Senior Economist at Westpac Bank.

More broadly, Hanlan says Australia’s recent trade performance has been a little underwhelming compared to what was seen in the September quarter.

“For the December quarter to date, the trade figures have been a little disappointing, with the surplus running at a monthly average of $2.0 billion. This is down from the $2.2 billion average in the September quarter,” he said.

Hanlan says given current tracking, trade may make a small negative contribution to GDP growth in Q4, a performance in stark contrast to what was seen in the middle of 2018.

“Net exports appear to be running as a modest negative to date in the quarter, whereas we were expecting a broadly neutral result. We look to the final month of the quarter to turn this it around,” he said.

Marcel Thieliant, Senior Economist at Capital Economics, is another who says trade may drag on economic growth for the quarter.

“It still seems likely that net trade will at best make a neutral contribution to real GDP growth in the fourth quarter following the 0.3 percentage point boost in the third quarter,” he says.

“[That means] other parts of the economy will have to strengthen in order for GDP growth to recover in the fourth quarter.”